I trade cable, for example, 1 mini-lot for $1 per pip. I start a long trade, open at 1.2500, my take profit is 1.2515, my stop loss is 1.2475.
If this trade is a winner, then I win $15 for 15 pips x $1, and if this trade is a loser, then I lose $25 for 25 pips x $1. It is right, so far?
All of this is right if my leverage is low like 1:10, and it is right and exactly the same results if my leverage is medium like 1:50, and it is right and exactly the same results if my leverage is high like 1:200? It is all still right, so far?
If it is all right, then why do people wish to trade with high leverage? Where is the advantage, please?
yeah, you got it right. I feel higher leverage helps control larger position with less capital but that also increases the chance of risk taken. what is your comfort level with risk?
@AnnaProbably leverage has nothing to do with the risk attached to any position.The risk per pip is only a factor of position size.
Leverage only affects how much of your capital in your account is allocated against your position as initial margin.
In other words, the higher your leverage, the less capital is required to cover the margin requirements.
The advantage of this is that with higher leverage one can open bigger position sizes for the same amount of margin capital. Which also means bigger exposure to risk/reward - because a bigger position size has been taken.
Again, it is only the position size that determines the risk /pip, not the leverage (which only affects your capital requirement to open any position)
You nailed it—$15 profit or $25 loss per trade stays the same with different leverage.
People use high leverage to control bigger positions with less money, aiming for bigger gains. But remember, it also means bigger risks. It’s all about balancing the potential rewards with the risks you’re comfortable taking.
As everyone else has correctly said above, the calculation is exactly right.
For most people there isn’t one, realistically.
The world is full of forex traders who wrongly imagine there is.
If you wanted to have a large number of trading positions all open at the same time (but you should not want to!!), then higher leverage would mean that you need less margin (“cushion”) in your account, to do so.
The big, important point to understand here is that, by definition, no broker offering high leverage can be a properly regulated one, because the proper regulators (in the countries where there are proper regulators who can protect customers) don’t allow that. In America the maximum leverage permitted by law, for regulated brokers, is 1:50. In Australia and the European Union it’s 1:30.
This is plenty of leverage. Don’t join the losers who mistakenly imagine that lack of higher leverage is what holds them back from trading profitably!
For some traders, leverage helps them maximize the opportunities with smaller accounts, but I think those traders definitely have a strong risk management plan too. Is trading with a higher leverage not up to your trading style?
Trading with higher leverage can work if your risk management is solid, but it’s not for everyone. It depends on your ability to stay disciplined and control emotions under pressure.
Where does this “information” come from, @ChelseaR ? Are you suggesting that Anna’s calculation is wrong? If you think it’s right, how would higher leverage help Anna to “maximize the opportunities” with a smaller account?
Where does this “information” come from, @Amy95 ? Why does whether or not it works “depend on your ability to stay disciplined and control emotions under pressure”?
